You may have to pay for early termination of lease
A tenant’s early cancellation may have serious financial implications for the landlord
IT IS IMPORTANT to have written confirmation of early termination of a lease contract. This safeguards the refund of the security deposit to the tenant and allows the landlord to find a replacement tenant. More importantly, it prevents disputes and long and expensive litigation.
A tenant who blames the landlord and complains about the law being one-sided fails to realise that a lease is a contract that binds parties to carry out specific duties. Fulfilling the lease term is one of the duties.
A tenant who accepts the renewed lease for another fixed period is required to occupy the property for the entire period.
Where the Consumer Protection Act applies, the tenant can cancel the fixed lease by giving a month’s notice (20 business days) but this comes with certain conditions.
The landlord is entitled to recover costs for early cancellation. It includes all expenses incurred in securing a new tenant. This is not to punish the tenant, but to allow a landlord prejudiced by the early cancellation to receive reasonable compensation.
The contractual terms of the lease play a decisive role in giving a tenant the benefit of the doubt in the instance it is alleged that the landlord or his representative agreed to the early cancellation.
A clause that states that any change to the lease must be reduced to writing and signed by both parties for it to be binding will apply to early termination.
Take the case of a tenant who claims that the letting agent verbally agreed that there was no problem ending the lease six months before its expiry.
When the tenant hands over the notice of cancellation, the agent informs the tenant that there will be a cancellation fee and other charges. The tenant believes that there was a mutual agreement to end the lease that was binding, even though the agent was now denying it. The tenant is unlikely to succeed if the matter is taken up legally.
The landlord can hold the tenant liable for rentals for the remaining lease period until a new tenant signs a lease. The landlord may sue for loss of income because of the early termination of the lease.
The tenant’s early cancellation may have serious financial implications for the landlord.
If the landlord finds a replacement tenant immediately, he is obliged to refund the full deposit.
The landlord, in this instance, will also have to abandon any claim for future rentals.
The legal argument is that the landlord did not suffer financial prejudice by re-letting the dwelling and receiving a security deposit from the new tenant, even though the previous tenant vacated the dwelling prematurely.
The circumstance of each lease agreement is important in determining whether a party is justified in terminating the lease early.
In Vela v Dos Santos (2019) ZAGPJHC 123, the tenant, Marta Eduardo dos Santos cancelled her lease when her landlord Robin Vela failed to remedy a material breach.
She paid the rentals upfront for the entire six months’ lease period and later cancelled the lease when her landlord failed to remedy the breach for failing to provide vacant occupation of two flatlets.
Employees of Mitsubishi occupied the flatlets on the property and it was agreed that they would vacate by end of April 2015. It was further agreed that rentals for the two months, March and April, would be discounted.
The Mitsubishi tenants continued to occupy the flatlets after April, and Dos Santos cancelled the lease when the landlord failed to rectify this breach within seven days from June 12. She also claimed the rentals she paid upfront for the remaining period and the rental deposit.
The landlord appealed against the judgment granted in the Randburg Magistrate’s Court. The tenant cross-appealed, claiming remission of rentals for the two months the flatlets were occupied that deprived her of the full use and enjoyment of the property.
She claimed R60 000 being the amount equal to the concessionary discount the landlord granted her when she agreed that the flatlets would be occupied in March and April.
The court found that the amount she claimed as compensation for diminished use and enjoyment of the property was justified. The landlord’s appeal was dismissed.
What if the landlord decides to terminate before the end of a lease? Would the tenant be justified in refusing to move out?
In Ferox Investments v Blue Dot Nursery CC t/a Jasmine Plant and Centre (2006) 1 All SA 17 (O), the new landlord terminated the lease early, alleging structural damage to the property.
The landlord turned to the court when negotiations for the early termination of the lease deadlocked, with the tenant refusing to accept monetary compensation.
The court dismissed the landlord’s application to evict the tenant on the basis that while the lease allowed for early termination for serious structural damage, the landlord’s grand design was to revamp the main complex and introduce new businesses.
The crisp point is that neither the tenant nor the landlord can end the lease before the expiry date without financial consequences, unless both parties agree to the early termination. A written confirmation protects the parties and can be done through an email or any electronic means.
If parties are unable to resolve their disputes regarding early termination, they can turn to the courts and the Rental Housing Tribunals.
● Tenants who need advice during the lockdown can WhatsApp Pretty Gumede on 071 346 5595, Loshni Naidoo at 071 444 5671, or email loshni@ ocr.org.za and Dr Mohamed at civicrights@ocr.org.za.
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The circumstance of each lease agreement is important in determining whether a party is justified in terminating the lease early.
Dr Sayed Iqbal Mohamed is the chairperson of the Organisation of Civic Rights and deputy chairperson of the KZN Rental Housing Tribunal. He writes in his personal capacity.